Reduce gas regulation, urges Ferguson

Federal Resources and Energy Minister Martin Ferguson....“Victoria in many respects has led the way [and] the willingness of other state governments to take on these hard reforms will be essential.”
Photo: Glenn Hunt

The federal government’s energy white paper will urge state governments to follow Victoria’s lead in deregulating electricity markets in a bid to shift the blame for near 70 per cent plus rises in some household electricity bills in the past four years.

Federal Resources and Energy Minister
Martin Ferguson
, who will release the paper in Melbourne today, has a prepared speech that will place the onus back on state governments to reduce pressure on domestic power bills risking a new spat over who is responsible for high electricity prices.

“Victoria in many respects has led the way [and] the willingness of other state governments to take on these hard reforms will be essential," Mr Ferguson’s speech states. “It will take political courage where others have failed. But the Australian government will continue to strongly advocate for, and where appropriate, lead the reform process."

It follows a speech by Prime Minister
Julia Gillard
in August where she ramped up ­pressure on state governments including NSW and Queensland to reform energy markets arguing against the high rates of return generated by state power assets.

The Prime Minister wrote to the premiers asking them to end so-called “gold-plating" following weaker forecasts for power use, to reduce pressure on household power bills.

Retailer Origin Energy has questioned how fragmented state-based schemes would dovetail with the broad policy objectives outlined in the paper.

“I suspect the real question for this white paper is how do you effectively begin to implement those objectives through a process that will require multilateral state and state-federal co-operation in order to do that?" queried Origin Energy managing director
Grant King
.

Mr Ferguson’s speech states the key to delivering reform will hinge on the Council of Australian Governments.

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The minister also calls on states through COAG to reduce regulation and red tape to make the energy sector more attractive for investment.

“All jurisdictions must work to remove impediments to the timely development of domestic gas supply. The consequences of avoiding these hard decisions will be much greater."

The speech cites the boom in US domestic shale gas, which spurred investment and increased available gas. And presents a vision for Australian energy with four elements: a national approach to markets, transformation to cleaner energy without impeding competitiveness, gas reserves serving domestic need balanced by exports, and Australia as the “number one" investment destination.

“In my opinion, domestic gas policy needs to be an important part of that energy strategy, and unfortunately, in that regard, the current system is broken," Alcoa of Australia managing director Alan Cransberg said. “Despite having some of the most abundant natural gas resources in the world, we pay amongst the highest prices in the world for gas."

Alcoa and US corporation Dow Chemical have called for quarantining gas for domestic use in Australia – a policy the government is expected to reject in the white paper.

“The discussion around this energy white paper has raised expectations that improved market mechanisms and policy focus would be a feature of the final report and we certainly expect that to be the case," Dow Chemical Australia and New Zealand managing director Craig Arnold said.